What is a shortsale?

A short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold.

A short sale typically is executed to prevent a home foreclosure, but the decision to proceed with a short sale is predicated on the most economic way for the bank to recover the amount owed on the property. Often a bank will allow a short sale if they believe that it will result in a smaller financial loss than foreclosing as there are carrying costs that are associated with a foreclosure. A bank will typically determine the amount of equity (or lack thereof), by determining the probable selling price from a Broker Price Opinion BPO or through a valuation of an appraisal.  For the home owner, advantages include avoidance of a foreclosure on their credit history and partial control of the monetary deficiency.  A short sale is typically faster and less expensive than a foreclosure.  In short, a short sale is nothing more than negotiating with lien holders a payoff for less than what they are owed, or rather a sale of a debt, generally on a piece of real estate, short of the full debt amount.  It does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance of offer.